Temporary employment service providers are not gone – and definitely not forgotten

For many years, temporary employment service (TES) providers – colloquially called labour brokers – have been the backbone of the South African employment landscape, providing work to a vital sector of the population, the youth and the unemployed. The amendments to the Labour Relations Act (LRA) in 2015 threatened to curtail or end this vital sector, with TES employees being seen as employees of the TES client after a certain period of time.

This section of the LRA was challenged in 2015 by Assign Services in the Labour Court. It was ruled that the TES and the TES client become dual employers of the TES employee. In July 2017, this decision was challenged in the Labour Appeal Court (LAC) and it was successfully overturned.

Employment context

In an article in CNBC Africa, Derek Yu states, "Concerns about the high levels of youth unemployment and the social upheaval this might cause have been widely expressed." He goes further to indicate that "Among young people this figure is even higher – at 60.3%". With this background, one would anticipate that industries which secure jobs, particularly in the highest risk age groups, would be cherished … but it seems the opposite is true.

Too often there has been a generalisation around TES with rhetoric on slavery thrown around to garner support for those who wish to see the end of the industry. But is the rhetoric true for all providers?

Food for thought

In research conducted by Bhorat, Cassim and Yu in 2014, it was found that the TES sector was the biggest contributor to employment, especially of youth in South Africa.

The research found that temporary employment services (TES) have created more jobs in South Africa than any other sector since 1995.

The authors of the research add, "The evidence suggests that the sector has been the single highest creator of jobs in the economy – growing at a rate faster than all other main sectors of the economy. The majority of these jobs are concentrated in semi-skilled, service-orientated occupations, countering the perceptions that they are an unskilled-intensive employer.

"Perhaps most crucially, the industry is very clearly biased towards providing employment for young people and in ensuring that a significant share of these workers move into permanent positions."

In addition to employing millions of South Africa's youth, labour brokers are estimated to generate R40 billion a year – which contributes to tax revenue for the fiscus, employs millions and supports thousands of families.

The report goes on to highlight the positive impact that the industry has on the South African economy.

What does the LAC outcome mean for you, the employer?

If you use the services of a TES, you won't suddenly find yourself having a lot of extra employees. Leave to appeal has been filed with the Constitutional Court against this LAC decision. Even the Labour Appeal Court (LAC) confirms that there is no transfer of employment after three months. Parallel employment creates the ultimate protection to a worker and we are confident that this will be the decision of the Constitutional Court. The Confederation of Associations in the Private Employment Sector (CAPES) issued a press release shortly after the LAC judgement was handed down. In it, the Confederation stated that: "all involved in the matter have known, since the challenge was originally made to the CCMA in 2015, that the matter would – likely – go from the CCMA, to the Labour Court, to the Labour Appeal Court, and ultimately to the Constitutional Court …"

CAPES applied to the LAC hearing as an amicus curiae (a friend of the court). This was done to argue that the LAC had, itself, ruled that the Basic Conditions of Employment Act and LRA must be interpreted so as not to conflict with one another. These pieces of legislation work in harmony with one another and, as such, need to be interpreted in a congruent manner.

Many arguments were made as to why both Krost and Assign should both remain the employers of the TES employees so as to keep the accord between these two Acts. However, the learned judges decided not to deal with this issue in their ruling. We believe that if this issue had been dealt with by the LAC, the result would probably have been different.

Challenges faced and the road ahead

There are a number of commissioners who have considered applying an interpretation which creates a transfer of employment. This, however, leaves a number of unanswered questions. These questions include: What would the source of a deemed employee's terms and conditions of employment be upon sole deeming? What will happen to accrued benefits with the TES (such as leave)? How would the various terms and conditions ordinarily flowing from the Basic Conditions of Employment (BCEA) ​​apply (given that the employee is not deemed for the purpose of the BCEA)? Who will be the employer for the purposes of Compensation for Occupational Injuries and Diseases Act (COIDA) (Section 1 identifies the labour broker as the employer)? Who is the employer for the purposes of the Employment Equity Act? Who will be the employer for the Skills Development Levies Act (Schedule 4.2 defines the employer as being the labour broker)? Who is the employer for the purposes of income tax (Schedule 4 part 2 defines the labour broker as the employer and accordingly the obligation to deduct tax remains with the employer/labour broker)?

As previously stated, leave to appeal has been filed with the Constitutional Court. Until the outcome is received, it is our view that the TES client (as well as the TES) is the employer of the TES employee.

The questions posed by the Assign Services outcome are about to receive their final answers. The date for the Constitutional Court hearing of the matter will be 22 February 2018.

We hope that this legitimate job-creating industry will continue to help build our economy for years to come.

Jonathan Goldberg is the current COO of the Confederation of Associations of the Private Employment Sector (CAPES)​. He and his associate companies have numerous investments in business and he serves on the board (and chairman) of many companies. Jonathan is a leader and developer of the Wits University Enterprise Development Units executive development programme in B-BBEE. Over his career, Jonathan has edited three books, compiled many publications and delivered countless presentations and seminars and advises business and government in a range of different areas.